USAID to review contract after firm's board member found to operate sex products company

BY Advocate.com Editors

March 05 2003 1:00 AM ET

The U.S. Agency for International Development has launched a review of all government funds granted to Population Services International, a nonprofit group that manages HIV and sexually transmitted disease prevention programs overseas, after it was discovered that the founder of PSI also operates a company that sells sex products and X-rated videos, The Washington Times reports. USAID, an independent nonprofit group that distributes federal funds for economic and humanitarian aid to developing countries, has awarded more than $170 million in contracts to PSI's health programs.

Philip Harvey, who founded PSI and currently sits on its board, also owns the sex products company Adam and Eve, which began in 1974 as a mail-order condom distributor but has grown to include sex toys, lingerie, books, and X-rated videos, including gay-male and bisexual films. Last year 1.5 million customers bought nearly $70 million worth of Adam and Eve merchandise through the company's three retail stores, mail-order business, and Internet store.

Officials at USAID said that agency director Andrew Natsios ordered an immediate review of the PSI contract to determine if there is a conflict of interest between the PSI's work and Harvey's company. "[Natsios] was not aware of Mr. Harvey's business activities outside of PSI," said a USAID spokeswoman. There was no deadline given for the completion of the USAID review.

Harvey says there is no conflict of interest. PSI president Richard A. Frank said that Harvey has not had direct management responsibilities at the agency for decades and that he is paid "absolutely nothing" as a board member. "We have nothing to do with what he does in his private life, and I don't know much about his private life, but it has zero to do with us," Frank said.